Bank of Ireland to change current account fee structures from November 2012

Bank of Ireland has announced that new charging structures will apply to current accounts from the fee quarter beginning 19^th November 2012. From this date onwards you must maintain a minimum balance of €3,000 at all times in order to avoid paying transaction fees.

Currently in order to avoid transaction fees you need to lodge at least €3,000 throughout the fee quarter and also to make 9 debit transactions per quarter using 365 phone or 365 online. This change is likely to impact on a large amount of people who are currently avoiding transaction fees.

In a previous post on our blog earlier this year, we wrote about the options available after AIB announced the re-introduction of current account fees in May of this year. Much of the same still applies and you can recap on that blog article here:  http://smallbusinessadviceireland.blogspot.ie/2012/05/minimising-cost-of-aibs-reintroduced.html

Should I transfer some money from my savings account into my current account to enable me to maintain a minimum balance of €3,000?

This will depend on what interest rate that you are earning on your savings account and what fees that you will pay to Bank of Ireland. If the interest that you will earn on your savings is less than the fees payable on your current account, then it makes sense to transfer money from your savings account into your current account.

Example 1

If you pay €20 per quarter in bank fees, this is a total of €80 per annum.

If you have €3,000 on deposit at an interest rate of 3%, you will earn €90 gross interest of which €27 will be taken as DIRT (Deposit Interest Retention Tax - currently charged at a rate of 30%), leaving you with €63. As €63 is lower than the €80 you are paying in fees, you would be better to transfer the savings into your current account to maintain a minimum balance of €3,000.

Example 2

If you are on the flat fee rate of €11.40 per quarter (which allows for up to 90 transactions to go in and out of your account) you are paying a total of €45.60 per annum.

If you have €3,000 on deposit at an interest rate of 3%, as outlined above you will receive a net amount of €63. As €63 is higher than the €45.60 you are paying in fees, you would be better to leave the money in your savings account and instead to incur the current account fees.

In this same example however, if you have €3,000 on deposit at a lower interest rate of 2%, you will earn €60 gross interest of which €18 will be taken as DIRT, leaving you with €42. As €42 is lower than the €45.60 you are paying in fees, you would be better to transfer the savings into your current account to maintain a minimum balance of €3,000.

Which banks are offering fee free current account services?

Currently Ulster Bank is the only bank offering fee free banking. They had previously indicated that this would change but after the massive recent IT meltdown they have advised that fees for current account services will not be introduced at least until July 2013. However the fact that a date has been provided suggests that fees will definitely be introduced at some point.  

Dublin Accountants and Tax Advisors  www.fenero.ie